How debts and double-dealing sparked Japan-China islets row

OMIYA, Japan (Reuters) - The road to China's breakdown in relations with Japan began here - a sleepy Tokyo suburb that is home to the reclusive real-estate investor at the centre of the explosive property deal that enraged Beijing.

Surrounded by concrete walls, security cameras and warnings of guard dogs, Kunioki Kurihara has shunned the spotlight in his compound since closing a deal to sell three uninhabited islands in the East China Sea to Japan's government in September.

The islands, known as the Senkaku in Japan, are also claimed by China, where they are known as the Diaoyu and deemed part of its national territory for centuries.

Their $25.5 million sale sent tension soaring between Tokyo and Beijing. Seen in Beijing as a nationalisation of private property, it sparked violent protests and a boycott of Japanese goods. Chinese ships were dispatched to patrol disputed waters.

Participants close to the deal describe how a property magnate with heavy debts clinched a deal he had sought with the government for at least six years by playing it off against a fiery nationalist - Tokyo's then-governor, Shintaro Ishihara.

Ishihara has since resigned to return to national politics at age 80. It was his initial offer to buy the islands that led to a quick government purchase - at a markup of at least half a million dollars.

Kurihara, 70, declined a request for an interview.

His younger brother Hiroyuki, who describes himself as family spokesman, has used his sudden fame to promote a book, "Senkaku Islands for Sale" -- and a longshot plan to turn the islands into a centre for medical tourism.
Continued...